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With all the talk about Apple TV and the coming Google-ization of the living room, I can’t help but think of another tech giant whose name is missing from these conversations: Cisco.

The reason Cisco is worth contemplating in this context is that the company — on paper at least — has always held a lot of cards in the high-stakes game of living room convergence. Notably, that includes:

• Ownership of a strong home networking offering
• A beachhead into the pay-TV world with a set-top business
• A large war chest in the form a market cap and cash/short term investments for further acquisition

But even with these assets, Cisco has been a no-show in the recent buzz about the connected living room. As Apple re-vamped Apple TV, Google launched a big TV initiative, and others have pushed heavily into the connected TV space, the networking giant has remained largely silent.

What is the Problem?

Why hasn’t Cisco been a part of the larger conversation around the future living room?  In a word, software. The company has never been exceptionally strong outside its core hardware strengths, and its software Achilles heel is exceptionally apparent in the living room, where consumers expect elegance and ease-of-use when it comes to the user-experience.

It’s certainly not for a lack of trying. In recent years, the company has made a string of acquisitions in an attempt to strengthen its consumer software story:

• KiSS Technologies (2005): a networked entertainment company based in Europe
• Pure Networks (2008): a home-networking software player
• Pure Digital (2009): the owner of the Flip camera franchise with a strong software and UI story to go alongside the obvious Flip brand benefits
• ExtendMedia (2010): an online video platform software play targeted at giving Cisco’s video division an answer for TV Everywhere

But even after all of this money spent, Cisco still doesn’t figure into the conversation about who will rule in a connected TV/app-TV centric living room. To be fair though, the company is not completely to blame, as it is no doubt hamstrung by its customer base. Large cable providers are Cisco’s main customers in the living room today, and these companies prefer to have their brand foot-forward, even if they aren’t doing a whole lot of innovation themselves.

What Should Cisco Do?

Nonetheless, a more focused entry into the living room race seems necessary. In order to do that, Cisco should go big, carriers be damned. Cisco needs to bring some signficant software development in-house as well as harness the power of independent software developers by offering a services and application platform. In other words, if they build it (or buy it), the MSOs will come.

Does this mean buy Skype, as has been rumored? I think Skype could be part of the answer, as the VoIP player has already moved into the TV space and is offering its own SDK for apps and services on CE devices. There’s no doubt the company would bring Cisco a low-end offering for video chat to go with the high-end telepresence dreams of Chambers.

Another potential platform-play could be Boxee. It’s a smaller company, sure, but it  still would bring a development and OTT apps platform that Cisco could offer on its own devices and potentially with willing CE and set-top box partners.

But be it with Skype, Boxee or someone else, Cisco needs to move to get solidly into the connected TV market. A strong software and application development platform means Cisco will not only to stay relevant, it will also provide its carrier partners with a solution they can’t seem to provide themselves.

Related Research: 3 Things Apple iTV Must Do to Succeed

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